Ron works for Betty at Betty's Pizza Palace. Betty has many work rules, and Ron believes if there were fewer rules and more flexibility, he could do a better job. Betty probably has the rules because

Question

Quizplus · Accepted Answer

The principal-agent problem refers to the potential conflict of interest between the owner (principal) and the employees (agent) who are entrusted with carrying out the owner's vision and goals. Betty's work rules may be in place to mitigate this problem by ensuring that employees are performing their duties as expected even when the owner is not present. With less explicit guidance, some employees may be more likely to shirk their responsibilities, resulting in lower productivity and possibly lower profits for the business.

Ron Works for Betty at Betty's Pizza Palace